Australian Broker 10.24

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DECEMBER 2013 ISSUE 10.24

+INSIDE + NEWS A look at what’s been making headlines P4

+ YEAR IN REVIEW THE ROAD WE’VE TRAVELLED

The people and issues that shaped 2013 P8

Aaron Milburn:

+ MARKET TALK

WHY INNOVATION IS KEY IN 2014

WHAT’S AHEAD FOR HOUSING?

Looking ahead to 2014, Citi’s Aaron Milburn says it’s time for the home loan industry to evolve

IS ASIC WATCHING YOU ON FACEBOOK?

C

iti’s head of broker distribution, Aaron Milburn, is worried that the mortgage broking industry has stagnated, with a lack of innovation and a dearth of fresh talent flowing in to replace those exiting the industry.

So Milburn’s spent the best part of 2013 listening – and now, he’s ready to put that feedback into action.

FULL STORY PAGE 20

Property market predictions for 2014 P18

+ BEST PRACTICE

We look at the dangers that exist in using social media improperly P22

+ PEOPLE HORROR AND HOPE IN THE AFTERMATH OF TYPHOON HAIYAN Hand-delivering aid in the Philippines P28

+ CAUGHT ON CAMERA CONNECTIVE CONFERENCE P29

NEWS 2

brokernews.com.au

WHAT THEY SAID...

NUMBER CRUNCHING

PHIL NAYLOR

OVERSEAS INVESTMENT TRENDS

“It is too early to draw a wide conclusion on it, but there seems to be a dispersion of business into the second tier lenders, which is good from a competitive point of view” P4

Top three foreign buyer nationalities in Sydney NOW

1. NEW ZEALAND

2. SINGAPORE

3. UK

DID YOU KNOW?

1,925

1. INDONESIA

Number of high networth individuals (those with net assets worth $30m or more) expected to live in Sydney by 2022, compared to 1,405 now (a 37% rise)

2. JAPAN

Source: Knight Frank Global Development Review, 2013

IN THE FUTURE

CAMERON KUSHER

“Most economists have now pushed back the timing of their predicted future rate cuts with some now forecasting that the next movement will be an increase” P18

Source: Knight Frank Global Development Review, 2013

AARON MILBURN

HOME LOAN HEADACHES Fastest growing mortgage increases within each state/territory LOCATION

MEDIAN REPAYMENT 2006

2011

Western Australia Ashburton

$252/month

$954/month

278.6

Northern Territory Victoria-Daly

$1083/month

$2600/month

125.4

Queensland Blackall Tambo

$499/month

$953/month

91.0

South Australia Roxby Downs

$1300/month

$23/month

78.7

Tasmania George Town

$700/month

$1200/month

71.4

New South Wales Hay

$650/month

$1083/month

66.6

Victoria East Gipplsand

$867/month

$1296 /month

49.5

% CHANGE

Source: Australian Bureau of Statistics

“We need to make sure we get the feedback of our brokers, make sure we listen to the clients that we’re bringing on through brokers and react to that” P20

TONY MACRAE

“I think in the broker community there’s growing awareness that [SMSF advice is] not for everyone. But many brokers will ultimately decide that they want to play in this space and, if they do, there are ample resources available for education and training” P26

NEWS 4

brokernews.com.au brokernews.com.au EDITOR Adam Smith

Kathy Cummings leaves CBA

Loan writer steals $170,000 from client

■ After nearly 20 years, Kathy Cummings,

■ South Australian mortgage broker, Malcolm

executive general manager of third party and mobile banking, has decided to leave CBA. “In her time with the group, Kathy has made a significant contribution to the retail bank. She has always been a great collaborator and has worked tirelessly for the good of her customers, brokers and her team,” said retail banking services group executive, Matt Comyn.

Following Kathy’s departure, the mobile banking team led by James Sheffield will return to the branch network under Lyn McGrath, executive general manager retail sales.

Lyn Cobley, executive general manager of retail products and customers, will assume responsibility for the sales support & channel development led by Simon Elwig; and the broker sales service and cross sell team led by Sam Boer.

The changes will be effective from 1 January 2014.

Cummings will assist with the transitioning of the team and remain with the group until the end of the year.

Kathy Cummings

SHE HAS ALWAYS BEEN A GREAT COLLABORATOR AND HAS WORKED TIRELESSLY FOR THE GOOD OF HER CUSTOMERS, BROKERS AND HER TEAM - M ATT COMYN, CBA

Royce Jones, pleaded guilty in the Adelaide Magistrates Court to charges including falsifying documents in order to steal $170,000 from a client.

Royce Jones allegedly forged the documents in September last year and was arrested in June, charged with aggravated charges of deception and dishonest dealings with documents. He initially pleaded not guilty, but has now admitted to perpetrating the crimes.

Bank enters broker market for the first time ■ One of Australia’s largest mutual banks,

Teacher’s Mutual Bank, has entered the broker distribution channel for the very first time.

Teacher’s Mutual Bank is the only national bank in Australia tailored towards teachers and their families. The group’s national manager, third party distribution, Mark Middleton, said the lender hopes to bring its ‘competitive loan products’ to this market with the help of brokers.

“We’ve got keen aspirations to grow our business...

We realised that we’re playing in a sandpit where the full [potential] isn’t being realised – and with brokers today providing 43% of the loans in the market, we’d like to have access to part of that market,” said Middleton.

The mutual bank services around 600,000 members of the education sector, including teachers, school staff and their families.

“We’re now ideally positioned to offer access to our highly competitive products via the broker channel,” said Middleton.

BROKERS SEE BOOST IN MARKET SHARE ■

Brokers have seen a significant boost in market share in the September quarter as buyers hurry to take advantage of low interest rates.

According to the MFAA’s latest figures, mortgage brokers wrote 46% of all home loans in the three months to the end of September – a total of $32bn.

This compares to about 40% 18 months ago and a low of 38% during the GFC. And the boom is unlikely to slow down any time soon, MFAA CEO Phil Naylor told the AFR .

“In the September quarter, [activity] has bumped that up a bit more. And what we are hearing from the major broking groups in October and November to date is that they are writing a lot of business so we would expect that percentage to be maintained and most likely increase.”

A larger proportion of these loans are also being directed towards second-tier lenders, said Naylor.

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Australian Broker is the most-often read industry publication, according to independent research carried out by the EhrenbergBass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

FAST FACT

“It is too early to draw a wide conclusion on it, but there seems to be a dispersion of business into the second tier lenders, which is good from a competitive point of view,” he told AFR .

September also saw the total number of approved home loans rise by 4.4%, the largest gain in six months.

Investors continue to drive the market, however, with first home buyers accounting for just 12.5% of loans.

Phil Naylor

4.4%

Amount that the total number of approved home loans rose by in September 2013

NEWS

brokernews.com.au

6

Former WA broker permanently banned from industry

ANZ cleared of price fixing ■ The Federal Court has dismissed allegations of anti-competitive

■ ASIC has permanently banned a former

mortgage broker from engaging in any credit activities and providing financial services following her jailing for defrauding 24 investors of more than $4m.

In June 2013 Catherine Anne Thompson of Mortgage Miracles Pty Limited was convicted of stealing and sentenced to five years and one month in jail. She must serve three years and one month in jail before she’ll be eligible for parole and must also pay compensation to her victims.

Between 2007 and 2008, Thompson, formerly of Canning Vale, Western Australia, convinced her clients, including friends and members of her church, to part with hundreds of thousands of dollars for an investment scheme.

Thompson has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

WA Police investigated Thompson’s conduct and she pleaded guilty in the District Court of Western Australia.

BETWEEN 2007 AND 2008, THOMPSON CONVINCED HER CLIENTS, INCLUDING FRIENDS AND MEMBERS OF HER CHURCH, TO PART WITH HUNDREDS OF THOUSANDS OF DOLLARS FOR AN INVESTMENT SCHEME

FAST FACT

25% Percentage of Connective that Macquarie Bank acquired in November

behaviour and price fixing against ANZ. The proceedings were brought by the ACCC in relation to conduct in 2004 in which the bank required Mortgage Refunds to limit the amount of refund it could provide customers when arranging ANZ home loans.

The bank allegedly threatened to withdraw ANZ accreditation for Mortgage Refunds unless the company agreed to limit refunds to $600 or less, allowing ANZ branch staff to match the deal by waiving the ANZ loan establishment fee.

Justice John Dowsett found the conduct did not amount to price fixing as ANZ did not participate in the market for the provision of loan arrangement services and therefore was not in direct competition with Mortgage Refunds.

The ruling was one of six competition cases expected to be taken up by the ACCC this year. In the previous two years the ACCC has taken up a total of four competition cases.

ACCC chairman said anti-competitive agreements between competitors are a priority for the regulator.

The judgment is extensive, and the ACCC will give it careful consideration.

NON-MAJOR TAKES FURTHER STAKE IN BROKER CHANNEL ■

Macquarie Bank Limited has acquired a 25% stake in aggregator Connective.

Connective principal Glenn Lees said he is “delighted” at the opportunities the new alliance presents.

“Over the past four years Connective has grown considerably. The time was right to seek a strategic alignment with a major financial services organisation. We strongly believe that Macquarie’s investment strengthens our leading platform and marks the start of our next phase of growth.

“We devote considerable resources to assisting our members to operate more efficient and profitable businesses, and Macquarie’s investment will open up many new avenues to further support our brokers in their success.”

The move also marks further expansion into the broker channel for Macquarie, which recently announced plans to double its share in the Australian mortgage market to return to preGFC levels.

Glenn Lees

brokernews.com.au

WORLD NEWS UNITED STATES OF AMERICA BIG BANK ASKED TO HAND OVER $863.6m OVER MORTGAGE ‘HUSTLE’

The US federal government wants Bank of America to fork out over $863.6m in damages following a jury finding the lender liable for fraud over shoddy mortgages sold by its Countrywide unit.

The lender was found liable for defrauding Fannie Mae and Freddie Mac through the sale of subpar mortgages purchased through Countrywide between 2007 and 2008, according to a Reuters report. Also liable was former Countrywide executive Rebecca Mairone, from whom the government requested damages “commensurate with her ability to repay”.

According to prosecutors, Countrywide ran shoddy mortgages through a program known as “High Speed Swim Lane” or “Hustle,” in which underwriting standards were sacrificed for approval speed and volume. Thousands of the deficient mortgages were sold to Fannie and Freddie, which saw a gross loss of more than $848m and a net loss of more than $131m, according to Bloomberg. Countrywide, meanwhile, earned at least $165m selling loans through the “Hustle” program.

MORTGAGE COMPANY HANDS OVER MILLIONS IN DISCRIMINATION SUIT

A Deutsche Bank subsidiary has agreed to pay more than $12m to settle allegations that it discriminated against African American and Hispanic borrowers.

MortgageIT, an indirect subsidiary of the banking giant, paid $12.1m to settle the claim by the Department of Housing and Urban Development. HUD had alleged that the company’s practices resulted in minority borrowers being charged higher annual percentage rates and fees than similarly qualified white borrowers. The company also denied mortgages to black and Hispanic borrowers more often than similarly qualified white borrowers, according to HUD. Deutsche Bank has denied the allegations.

CANADA BANK ECONOMIST SAYS RATE HEADING UP, HOUSE PRICES STAYING FLAT

One leading economist believes Canadian housing prices will remain steady for the foreseeable future due in large part to rising interest rates.

“I think we’ll be fortunate to see any price increases whatsoever in Canadian home prices over the next 5-10 years,” Doug Porter, chief economist with the Bank of Montreal said.

In a Globe & Mail segment entitled “Will higher mortgage rates ruin the housing market?” Porter answered questions about the rising rate environment and he believes homebuyers will be paying higher rates come renewal time for the next 3-5 years.

“If we look at one example – the five year special rate – it’s risen about 80 basis points from its extreme lows earlier this year, already,” Porter said. “And we do expect that the upper pressure that we’re seeing on long-term interest rates in the bond market will lead to somewhat higher mortgage rates over the next 12 to 18 months as well. But not as much as the increases we’ve seen… about half a percentage point over the next year.”

7

SPECIALIST LENDER UPDATE

Lenders minding banks’ customers... WT? Loan scenarios sometimes make for strange bedfellows.

Leading short-term lender, Quantum Credit Business Development Executive, John Broadway says one valid perspective on the crucial role of short-term lenders is; “they look after banks’ customers” by providing short-term funding solutions that otherwise may be unavailable.

Any notion that banks and short-term lenders are competitors is inaccurate, says Broadway.

“Quantum Credit prides itself on having the financial resources and skills to develop creative, customised, temporary solutions to bridge gaps in bank funding,” he says.

“Around 40 per cent of our loans are settled by banks and other funders, meaning we supply a vital, interim lending option for banks’ business and investment customers.”

Broadway admits banks may not acknowledge this collaborative relationship but says the reality is that reputable, specialised, shortterm lenders such as Quantum Credit can be vital components of a loan scenario and should certainly be part of a broker’s solution suite.

Bank finance is generally the cheapest option. But the cold, hard fact is that bank funding is not always on the table and even if it is, the terms and timeframe may be unsuitable, resulting in costly missed opportunities, a good credit record sullied or a project falling over.

“Short-term lenders such as Quantum Credit, established in the lending arena for 13 years, are part of a continuum of solutions for borrowers in need. We can represent a collar around a bank relationship,” says Broadway.

“A number of brokers don’t recognise this. They don’t appreciate the value of a shortterm solution or identify opportunities to put customers in a short-term loan either on-the-wayinto or on-the-way-out-of a bank relationship. This is frustrating for us and potentially a needless loss for brokers and their clients.”

An example of an on-the-wayinto a bank relationship scenario

JOHN BROADWAY, QUANTUM CREDIT is a borrower presented with a business opportunity that requires prompt servicing. Banks cannot accommodate because they need months to process a loan application.

An on-the-way-out-of a bank example is a bank running out of appetite to extend funds or a loan gone bad - the borrower has a tarnished record and the bank wants to extricate the borrower post haste.

When a short-term lender such as Quantum Credit steps into the situations outlined above, years of expertise and processes specifically designed to deliver fast, flexible short-term funding are employed. In all instances the short-term funder’s relationship is with bank clients.

Quantum Credit possesses expertise in a specialised lending niche that mainstream bank lenders traditionally do not address well - asset-rich borrowers who need short-term funding quickly and do not meet standard liquidity or credit requirements. In these situations, Quantum Credit applies an assetbased-lending approach to its loan assessments, focussed on exit planning and taking the view that the equity in the property asset security will be sufficient to cover risks in the event of default.

“Without successful lenders like Quantum Credit that operate in a specialist financing space and boast a record of responsible lending and commitment to service, it would be a lose/lose/lose (borrower/broker/ bank) all round,” Broadway says.

For further information re short-term loans call Quantum Credit 1300 135 212

SPECIAL REPORT 8

The road we’ve travelled As the year draws to a close, we take a look back at the issues that defined the industry in 2013

brokernews.com.au

SPECIAL REPORT

brokernews.com.au

9

AUSTRALIAN BROKER 10.1

I

PRODUCTIVITY NOT A ONE-WAY STREET

t’s been another tumultuous year for the mortgage broking industry. With continued consumer unease offset by record-low interest rates and a warming housing market, brokers have had a lot of shifting circumstances to contend with. On top of it all, we’ve gone through devastating bushfires, more global economic twists and turns, and no less than three prime ministers.

Before we hurdle headlong into what’s set to be another interesting year for brokers, we take a look back at the stories that shaped 2013.

Westpac’s head of mortgage broker distribution, Tony MacRae, kicked the year off by arguing on behalf of brokers in the great productivity debate. Brokers often hear that they must increase their productivity to drive more revenue, but MacRae said banks needed to pull their weight as well.

TONY MACRAE “I think the current productivity debate has really lost sight of the reality that there’s a customer at the centre of everything we do, both for our brand and the broker’s brands”

QUIT THE BROKER BASHING Brokers were enraged by a number of News Ltd articles by Jessica Irvine that suggested consumers could get a better deal by going to comparison sites, and that brokers had a conflict of interest because they received a commission. FBAA president Peter White fired back, taking aim at what he branded “tabloid journalism”.

PETER WHITE “Ms Irvine owes consumers and finance brokers nationally an apology for the gross inaccuracies contained in her recent articles”

AUSTRALIAN BROKER 10.2 THE PERILS OF CONSOLIDATION Industry pundits at the beginning of the year predicted we’d see more aggregator consolidation in the year ahead, and while that didn’t come to fruition, consolidation still remains a likelihood for aggregators in the future.

STEVE KANE “The economics will drive more consolidation, but it has to be the right consolidation.

Otherwise, you could be destroying your own business”

GRIM OUTLOOK Australian Broker Online ran a poll asking respondents if mortgage broking was still a viable career for new entrants. The results were rather pessimistic.

NO YES 24% 24% 55%

MAYBE/ IT DEPENDS

21%

SPECIAL REPORT

brokernews.com.au

10

AUSTRALIAN BROKER 10.5

AUSTRALIAN BROKER 10.3

MAKING THE PATH CLEAR

BROKERS LEAVING LOW-DOC MONEY ON THE TABLE

The year was dominated by discussion of the best way to bring new entrants into the industry. With the barriers to entry becoming more onerous, Citibank head of mortgages Vibha Coburn said it was important to present would-be brokers with a clear career progression and a variety of models for entry.

Resimac COO Allan Savins said brokers looking for new revenue streams didn’t necessarily have to turn to insurance, commercial deals or various other diversification opportunities. He argued that many brokers had ignored the demand for low-doc lending, and that the market was growing.

VIBHA COBURN ALLAN SAVINS

“How do we build it up and make it into an industry that people don’t just fall into, but want to be a part of?”

“Nowhere in the NCCP does it say that a particular rate makes a loan unsuitable. It’s unsuitable if the borrower can’t afford it and it’s going to bring on hardship”

ASIC’S NEW YEAR CRACKDOWN At the outset of the year, ASIC said it would be keeping a keen watch on the mortgage industry. Far from the “friendly giant” Gadens Lawyers’ Jon Denovan had predicted, the watchdog would take a tough stance on non-compliance, ASIC commissioner Peter Kell said.

DIPLOMA TSUNAMI With the MFAA deadline for diplomas having passed in January, association CEO Phil Naylor said in February that the group was sorting through a “tsunami” of qualifications, and that the vast majority of MFAA members had completed their upskilling.

PETER KELL “I wouldn’t characterise ASIC’s approach as ‘light touch’”

AUSTRALIAN BROKER 10.6

AUSTRALIAN BROKER 10.4 A LOT TO LEARN FROM OUR KIWI NEIGHBOURS Following the company’s expansion into New Zealand, Loan Market executive chairman Sam White said Australia could learn from the mortgage broking industry there.

White said Australia’s trans-Tasman neighbours were more focused on the integration of financial services, especially with the loss of trail income.

FAST FACT

36.9% Of the consumers who don’t have a self-managed super fund, 36.9% say a lack of knowledge is their main deterrent

TIME FOR A BREATHER After spending the past few years coming to grips with new regulations and a licensing regime, MFAA CEO Phil Naylor said that politicians and regulators should hit pause on any new regulations and give brokers time to adjust.

PHIL NAYLOR “Rather than bring out NCCP Phase III or IV in haste, it’s time to slow down so the industry can have a breather”

Source: SPAA and Russell Investments

SAM WHITE “There are people out there who genuinely believe that insurance is a fundamental part of the way brokers should do business”

DEMYSTIFYING SMSFS Brokers have been told for much of the year that self-managed super funds represent an enormous opportunity for the industry. In February, Australian Broker talked to industry experts about how brokers could get involved.

BROKERS VS PLANNERS The age-old debate between mortgage professionals and financial advisers was stirred again last year when MGF Consulting Group’s Max Franchitto argued that planners were better prepared to move into brokers’ territory than vice versa.

brokernews.com.au

11

AUSTRALIAN BROKER 10.7 CUTTING THROUGH THE RED TAPE After moving on from Oxygen Home Loans to take the reins of Century 21, James Green said one of the primary challenges he would face in drawing new brokers to his business was the red tape aggregators used to keep brokers locked into their contracts.

JAMES GREEN “There are too many steps, processes and documents required to take someone from ‘A’ aggregator to ‘B’ aggregator”

CONFIDENCE CONUNDRUM Consumers earlier in the year were struggling with confidence, with Genworth’s Homebuyer Confidence Index falling 5.1% from September 2012 to May of this year.

18% Sept 2012

23% 0

5

10

15

20

25

May 2013 Source: Genworth

AUSTRALIAN BROKER 10.8 ME BANK MAKES MAJOR MOVES ME Bank spent much of the year making its serious foray into the broker channel, and national broker manager Stewart Saunders said the third-party channel was vitally important for the bank with its smaller branch footprint.

STEWART SAUNDERS “By no means are we in a position yet to be able to implement our ideal proposition in the market, but we’re building toward that”

THE ELECTION AND BROKERS Then-shadow minister for finance Mathias Cormann spoke to Australian Broker in May, and made an appeal to brokers. He said the Coalition would look out for small broker businesses, cut red tape and put the brakes on further regulations. It would appear that brokers largely agreed.

SPECIAL REPORT

brokernews.com.au

12

AUSTRALIAN BROKER 10.9

AUSTRALIAN BROKER 10.11

THE CHANGING FACE OF COMPETITION

MISSING THE POINT ON CONVERGENCE

Liberty’s John Mohnacheff warned brokers that competition in the future could come from unexpected sources. While mutuals, majors, non-majors and non-banks would continue to battle, he predicted that non-traditional players like supermarkets, Australia Post and multinational organisations could enter the home loan market.

ING Direct’s Mark Woolnough said that much of the debate about diversification had missed the point.

While much of the conversation had centred on how the convergence of financial services would affect brokers or planners, he said too little attention had been given to the positive end result for consumers.

MARK WOOLNOUGH “Convergence of financial services should allow customer interaction and engagement to be far more holistic”

JOHN MOHNACHEFF “The consumer of the future wants flexibility. If you can do the one-stop-shop model, mate, you’re on to a winner”

THE BIG SHIFT THE LMI FIGHT FBAA president Peter White said he was not giving up the battle to see LMI become transferable.

He said the LMI market suffered from a lack of transparency and a lack of competition.

PETER WHITE “I’m not against LMI. It’s a very important necessity for our industry; it just needs fair play and full disclosure”

WealthMaker’s Michael McAlary said the industry should pay attention to important demographic shifts, which would impact future consumer preferences.

SHIFTING TRENDS LIFE EXPECTANCY ANALYSIS

1960

TODAY

Life expectancy

71

82

Childhood and education

19 years

25 years

Income earning

44 years

35 years

Retirement

8 years

22 years

AUSTRALIAN BROKER 10.10 AUSTRALIAN BROKER 10.12 KEEPING THE INDUSTRY YOUNG FBAA president Peter White announced the association would be starting a program to introduce young people to the idea of mortgage broking as a career. The program would introduce high-school students to the FBAA, and offer them free student memberships.

PETER WHITE “What we need to do is touch people when they’re making decisions in high school about their careers”

UNFAIR CHANGES Clean Credit’s John Dickinson argued that the incoming positive credit reporting regime held more than a few negatives for consumers. He said the changes could result in more people being denied credit.

FINDING THE NEW NICHES Pepper COO David Holmes said specialist lenders were finding new demographics that larger lenders had abandoned. He argued that brokers should pay attention to specialist lending, as the client base was larger than they may have realised.

DAVID HOLMES “Customers who were prime borrowers before are now unable to obtain home loans, and are almost disenfranchised”

SHOULD BROKERS MAKE HOUSE CALLS? A debate was ignited earlier this year when MPA Top 100 broker Mark Davis said he wouldn’t do house calls for clients. Some brokers agreed that having a client come to an office put forward a more professional demeanour, while others said the flexibility of house calls was part of what made the broker proposition attractive.

SPECIAL REPORT

brokernews.com.au

13

AUSTRALIAN BROKER 10.15

AUSTRALIAN BROKER 10.13 A DECADE IN THE BUSINESS

ATTRACTING A NEW GENERATION

Australian First Mortgage celebrated 10 years in business this year, and director Iain Forbes said the mortgage manager would stick to the philosophy that had made them successful.

A common theme throughout the year was the struggle to attract new entrants to the mortgage broking industry. Choice CEO Stephen Moore said the aggregator would be running a series of seminars across the country to introduce would-be brokers to the industry.

IAIN FORBES

DID YOU KNOW?

“We just continue to do what we are doing and what we have done, which is go out there and service brokers”

$31.7bn The total value of commercial finance in May

A CRITICAL LOOK AT AGGREGATORS

STEPHEN MOORE “It’s such a fantastic career opportunity.

Just not enough people know what a great career it is”

Source: ABS

Australian Broker’s sister publication, MPA, polled brokers on how aggregators were performing. On the whole, aggregators came out looking pretty good.

13%

24%

No

76%

87%

Are you happy with your aggregator’s fee/commission split?

BUILDING A NEW BUSINESS OPPORTUNITY Australian Broker looked at the commercial lending sector, and spoke to some leaders in the industry about the opportunity it presented for brokers.

Yes

Are you worried about the sustainability of your aggregator’s business model?

AUSTRALIAN BROKER 10.16

AUSTRALIAN BROKER 10.14

STOP THE BLAME GAME

A NEW APPROACH TO LEARNING

Adelaide Bank head of lending Damian Percy said he was tired of lenders pinning the blame for productivity problems on brokers.

He said lenders needed more standardisation around front-end processes, much like lenders in the UK and US.

Intellitrain’s Paul Eldridge said the industry had fallen down on delivering value through Cert IV and diploma training. He argued that a five-day course simply couldn’t deliver the quality the industry deserved, and announced that the RTO had qualified for VET Fee Help so brokers could invest in better education.

DAMIAN PERCY

FAST FACT

PAUL ELDRIDGE “We have to stop trying to push people through in ridiculously short timeframes at ridiculously low course prices”

STILL GLOOMY The Credit Union Australia National Mortgage Survey showed that Australians had yet to shake gloomy consumer sentiment

Better – 10%

Stay the same – 42%

Worse – 48%

Will the economic outlook get better or worse over the next six months?

Heinrich said that out of rookie brokers who left the industry before writing their 10th loan, the leading reason for departing was being put in front of clients before they felt ready.

“We have 25 lenders who, as yet, seem incapable of getting together and agreeing on relatively standard procedures which could actually reduce the complexity both for brokers and for lenders”

DROWNING IN THE DEEP END As the pleas for young blood in mortgage broking continued, National Finance Institute trainer Peter Heinrich issued a reminder that seasoned brokers should not to throw new entrants into the deep end and hope they could swim. He said cutting back on learning time for new brokers was a “false economy”.

SPECIAL REPORT

brokernews.com.au

14

AUSTRALIAN BROKER 10.17

AUSTRALIAN BROKER 10.19

DOING RIGHT BY CUSTOMERS

RUNNING ITS OWN RACE

Commonwealth Bank chief Ian Narev addressed the Aussie Home Loans National Sales Conference in August, and said that the greatest thing brokers and banks could do was put client interests first. Narev warned of the far-reaching reputational damage that could be done by forgetting this.

While competition among aggregators remained fierce throughout the year, Connective principal Glenn Lees said the company would continue to do things its way. For Connective, Lees said that meant treating their business as a service business rather than a lending business.

IAN NAREV “If you don’t look after the financial wellbeing of the customer, it harms the reputation of the institution”

A LOOK BACK AT CLAWBACKS Two years on from the abolition of exit fees, Australian Broker took a look at how increased clawbacks had impacted the industry. Fortunately, the overwhelming response was that they had not eaten into broker profitability in any serious way.

AUSTRALIAN BROKER 10.18 MACQUARIE LEADS THE PACK Macquarie Bank topped Australian Broker’s inaugural Brokers on Non-Majors survey. Macquarie head of mortgages product James Casey said the bank had worked hard to get the “boring bits” right.

GLENN LEES “We see ourselves as a service business, and if you see your role in the value chain as that, it gives great clarity as to what you give the customer, and that is the broker”

SIFTING THROUGH THE SPRUIKERS As the SMSF property market heats up, ASIC has warned consumers to be wary of dodgy property spruikers pushing housing as an SMSF investment opportunity. Property Investment Professionals of Australia chair Ben Kingsley said borrowers should check property advisers’ qualifications and experience, feedback from past customers and commission structure.

AUSTRALIAN BROKER 10.20 THE PUSH TOWARDS EFFICIENCY Bankwest head of specialist lending Ian Rakhit joined the chorus of lenders championing brokers and saying that lenders had to pull their weight when it came to driving productivity. Rakhit said Bankwest was investing in a variety of processing upgrades to make their service to brokers more efficient.

JAMES CASEY “When brokers are such an important channel for nonmajors, it really sharpens our focus and clarifies our thinking on a whole lot of issues”

BROKERS ON NON-MAJORS Overall ranking: 1. Macquarie 2. Citibank 3. Suncorp Highly recommended: AMP, ING Direct

FAST FACT

3.58/5

Brokers gave non-majors an overall score of 3.58 out of a possible 5, taking into account product quality, BDM support, credit policy, lender image and reputation, broker remuneration, online platforms and communications, and training

IAN RAKHIT “I think there’s more that Bankwest needs to do than there is for brokers. If brokers have to move two steps forward, Bankwest needs to move five or six”

A CULTURE OF INNOVATION WealthMaker’s Michael McAlary argued that Australia had banked its economy too heavily on financial services. To truly remain globally competitive, McAlary said Australia had to commercialise its innovations.

MICHAEL MCALARY “We have become obsessed with financial services. This has proved to be a major mistake”

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AUSTRALIAN BROKER 10.21

SPECIAL REPORT 15

AUSTRALIAN BROKER 10.23

YOUNG GUN OF THE YEAR REVEALED

AUSTRALIAN BDM OF THE YEAR

Following the Australian Mortgage Awards, Australian Broker talked to Australian Young Gun of the Year winner Leteisha Pileggi of Mortgage Choice about her path into the industry. Pileggi showed a wisdom well beyond her years in the industry, laying out her plans to grow her business and continue her success.

Commonwealth Bank’s Damien Muir took home the award for best BDM of the year at the Australian Mortgage Awards. Muir put his success down to getting to know brokers’ businesses inside and out. Adding value, Muir said, means more than just product knowledge.

LETEISHA PILEGGI

DAMIEN MUIR

“I love meeting new people and helping people, and in this job I get to do both”

“We need to understand that brokers are smallbusiness owners.

They’re there to do the right thing and to help their customers achieve their financial dreams. The value we can give is the opportunity to provide ideas around how they can grow their business”

A LOOK BACK AT THE AMAs We recapped the mortgage industry’s premier awards event, revealing the brokers who took home trophies on the night, including: Australian Brokerage of the Year – Intelligent Finance Australian Young Gun of the Year – Leteisha Pileggi Australian Broker of the Year – Colin Lamb

AUSTRALIAN BROKER 10.22 KNOW YOUR RIGHTS AN EYE ON QUALITY RECRUITMENT Recruitment remained the predominant theme of the year. Aussie Home Loans kicked off a major recruitment drive, with plans to take on 150–200 brokers over the next year. Executive director James Symond said the franchise giant was proud of its track record of bringing quality people into the industry.

Lawyers Matthew Bransgrove and Leo Tyndall explained brokers’ rights when it came to their trail incomes, and what aggregators could and couldn’t do. The pair argued that brokers should have the upper hand when negotiating to leave an aggregator.

GETTING TOUGH

JAMES SYMOND “We can turn a butcher, a baker, a candlestick maker into a professional mortgage broker, as we have done hundreds and hundreds of times. We do this through having some of the best training in the industry”

Tyndall and Bransgrove said most cases with aggregators could be resolved without going to court, “after the exchange of a few nasty letters”

MARKET TALK

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18

What’s ahead for housing?

As the year draws to a close, RP Data’s Cameron Kusher takes a look at where the housing market stands and where it’s heading

A

ccording to the RP Data-Rismark Home Value Index results for October 2013, capital city home values increased by 1.3% over the month, following on from a 1.6% monthly increase in September.

Although the growth in home values was strong overall, it was largely attributable to value increases in the three largest housing markets (Sydney, Melbourne and Brisbane), along with Adelaide and Darwin. All other capital cities recorded lower values over the month. Over the three months to October 2013, combined capital city home values have increased by 3.4%.

As always, capital cities are experiencing a broad range of capital growth performances.

Recent growth in Sydney and Melbourne values has been significantly stronger than in the other capital cities. Value growth in Brisbane and Adelaide has picked up over the past three months, whereas value growth appears to be stalling in markets such as Perth, Darwin and Canberra.

The Hobart market continues to show no sign of any recovery from a values perspective; however, there has been some improvement in transaction numbers.

Combined capital city home values have increased by 7.9% over the past year, the fastest annual rate of value growth since October 2010.

Home values are generally increasing across the individual capital cities, with Hobart (-2.9%) and Darwin (-0.1%) the exceptions over the past 12 months. Annual value growth has been strongest in Sydney (11.6%), Melbourne (7.8%) and Perth (6.9%). Elsewhere, annual value increases have been more moderate in Brisbane (3.4%) and Adelaide (1.9%), although the rate of value growth is accelerating while it is slowing in Canberra (3.5%).

Capital city house values have increased by 8.2% over the past year compared to 5.9% growth in unit values. Adelaide and Darwin are the only capital cities in which value growth for units has outstripped value growth for houses.

Home values, at least at a combined capital city level, have now passed their previous record high levels. The combined capital cities index previously peaked in October 2010 and fell by a total of -7.7% based on the RP Data-Rismark daily index. Home values have now risen by 10.2% since the recent trough and today sit 2% higher than their October 2010 peak. Although values are broadly increasing, the rate of value escalation to date is well below that of the same period during the 2001, 2007 and 2009 market growth phases. Across individual capital cities, home values are 9.1% higher than their previous peak in Sydney but remain lower across all other capital cities. On a city-by-city

basis, the decline in values from their previous peaks are recorded as -0.8% in Melbourne, -8.4% in Brisbane, -3.9% in Adelaide, -0.6% in Perth, -15.2% in Hobart, -9.5% in Darwin and -1.1% in Canberra.

SELLERS’ MARKET

FAST FACT

2%

Housing values are now 2% higher than their previous October 2010 peak

Sales activity has continued to increase across the country, with both house and unit sales volumes currently above the five-year average levels.

RP Data estimates that over the three months to August 2013 there were 87,948 houses and 33,014 units sold. Based on these estimates, house sales are currently 18.3% higher than they were at the same time last year and unit sales are 15.8% higher. At the capital city level, sales over the past three months have risen across each city compared to the same three-month period in 2012.

The greatest increases have been recorded in Melbourne (26.9%), Sydney (23.2%), Brisbane (22.6%) and Darwin (16.7%).

On the other hand, the rise in sales volumes has been more moderate in Canberra (3.0%), Perth (8.9%), Adelaide (10.6%) and Hobart (15.0%).

Sellers continue to enjoy increasing levels of empowerment when looking to bring their properties to the market. Sales volumes are clearly rising while the number of properties listed for sale is lower than at the same time last year. We are also seeing reduced levels of discounting by vendors in the market, which is contributing to a faster rate of sale. Across the combined capital cities, the level of discounting by vendors has reduced from 6.9% last year to 5.7% currently. This has resulted in homes selling faster, with the number of days it typically takes to sell reducing to 44 days from 56 days a year ago.

The number of newly advertised capital city properties listed for sale has been trending higher since the middle of August and is now 4.3% higher than a year ago. The total number of listings has also risen recently; however, total listings are 12% lower than they were a year ago. Total property listings are lower than a year ago in all capital cities except for Perth and Darwin.

RENTAL ROUND-UP

Rental growth across the capital cities is being significantly outpaced by the growth in home values; as a result, rental yields are easing. Over the 12 months to October 2013, capital city rental rates have increased by 3% for houses and 2.8% for

MARKET TALK brokernews.com.au

units, well below the five-year average annual rates of increase of 4.3% for houses and units. As sales volumes have increased, it is clear that rental pressures in the market are abating. Across individual cities, Perth and Darwin continue to record the strongest annual rate of rental growth; however, both have recorded a significant slowdown in rental growth recently. Over the three months to October 2013, rental rates have fallen in Melbourne, Adelaide, Perth, Hobart and Canberra.

The other aspect of the slowing of rental growth is the impact on rental yields. In October 2012, capital city gross rental yields were recorded at 4.2% for houses and 4.9% for units. Gross rental yields have eased over the past year to 4% for houses and 4.7% for units. With growth in home values much stronger than rental growth, it is reasonable to expect a further deterioration of rental yields over the coming months.

THE ECONOMIC OUTLOOK

Economic data has been mixed over the past month; however, the trend in most economic indicators is quite positive.

As at the end of October 2013, the S&P/ASX 200 share market index rose by 4% over the month and was 20.1% higher over the year. The index has now reached its highest end-of-month reading since May 2008.

Most other indicators are also trending in the right direction. The exceptions include the extremely low number of first home buyers active in the housing market currently; the slowly rising unemployment rate, which is tipped to peak at 6.25% next year; and lower commodity prices (albeit they are significantly higher than historic levels).

Across the other key economic data there is monthly and quarterly volatility; however, they are mostly heading in a positive direction.

Looking forward, the likelihood of the Reserve Bank cutting rates further seems to have eased with the more positive economic data. Most economists have now pushed back the timing of their predicted future rate cuts and some are now forecasting that the next movement will be an increase. The housing market is clearly responding in quite a positive manner to the lower rates and we are also seeing a response in dwelling approvals, which are now above their long-term average. A pick-up in dwelling construction is vital; the RBA has stated previously that a pick-up in housing construction is more vital than resurgence in the growth in home values.

As always, there is likely to be a continued variance in performances from city to city and region to region. Much of the growth over the year has occurred in Sydney, Melbourne and Perth, with growth in the Perth market appearing to slow more recently while in the two largest cities it seems to be continuing.

Over the last quarter there has also been a noticeable pick-up in value growth across the Brisbane housing market. Elsewhere, growth in home values over the past year has been moderate.

As value growth and sales volumes have picked up, rental growth has slowed, which has already begun to result in yield deterioration, and this may in turn act as a disincentive to such high levels of investment activity.

Perth and Darwin appear to have been impacted by slowing investment in the resources sector, and

19

FAST FACT

44 days The average time it now takes to sell a home, down from 56 days a year ago

this may further impact on housing demand; we are already seeing slowing rates of rental growth in both cities.

Although Sydney and Melbourne are continuing to see strong levels of home value growth, the best opportunities for investors have now passed, with values higher and rental returns diminishing.

RP Data anticipates that affordability constraints will start to impact on value growth in these cities over the coming months; additionally, low rental yields in Melbourne and Sydney are likely to see a deflection of investor interest to higher-yielding markets.

Brisbane will likely see an acceleration in value growth, due to the fact that it has had a much longer correction phase than most other capital cities and may be lagging the recovery currently occurring in the nation’s two largest capital cities.

Affordability in Brisbane is much healthier, as are gross rental yields. A similar recovery may also become apparent over the coming months in the Adelaide housing market.

Despite the signs that the housing and construction sector is picking up as mining investment slows, this does not mean that the economic changeover will be without its challenges. Globally, the US economy appears to be picking up and the Chinese economy seems to be experiencing a soft landing in terms of its moderation in economic growth. The national budget has recently seen an additional $33bn worth of revenue write-downs. Treasury is now forecasting that the unemployment rate will peak at 6.25% and has cut its economic growth forecast for this year from 2.75% to 2.5%. The anticipated jump in the unemployment rate is a potential risk for the housing market; if we reach 6.25% unemployment, this would be the highest rate since September 2002. If homeowners start to suffer widespread job losses or potential buyers become concerned about job security, this will potentially result in an increase in arrears rates and likely dampen housing market activity. And of course, if interest rates were to increase, this could extinguish some of the current housing market exuberance.

A LOOK AT THE NUMBERS

26.9%

MELBOURNE HAS SEEN THE BIGGEST INCREASE IN SALES ACTIVITY, UP 26.9%

11.6%

SYDNEY HAS SEEN THE STRONGEST HOME VALUE GROWTH OVER THE YEAR, WITH PRICES UP 11.6%

3%

20.1%

THE S&P/ASX 200 SHARE MARKET INDEX IS UP 20.1% OVER THE YEAR

6.25%

TREASURY IS FORECASTING THAT THE UNEMPLOYMENT RATE WILL PEAK AT 6.25%

CAPITAL CITY RENTAL RATES HAVE INCREASED BY 3.0% FOR HOUSES AND 2.8% FOR UNITS

2.8%

NEWS 20

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CONTINUED FROM PAGE 1

Aaron Milburn: Why innovation is key in 2014 Looking ahead to 2014, Citi’s Aaron Milburn says it’s time for the home loan industry to evolve

“Y

AARON MILBURN

ou know, if you point to the last ‘true’ innovation, that was the line of credit we brought out in the late 80’s. We are in hundreds of places around the world and we’re going out to those markets so that we can find out what products, or indeed what incentives, consumers are looking at across the globe that we can bring down to our Australian market… But we’re not brokers and we don’t profess to be. Therefore, for us, it’s [also] about collating some of the how-to-do stories out there from brokers and sharing that knowledge.”

Citi has spent the last 24 months rebuilding and refreshing its broker proposition to enable its broker partners to meet some of these new challenges and Milburn is quick to point out that the majority of the ideas came from loan writers themselves.

“I’m proud to say that over 90% of the strategy has been built by brokers. We are simply not a brand that believes that we can dictate to the broker market the way we think it should go. This is a joint effort; this is a team effort. Over 75% of our business at Citibank is driven through brokers – it’s not a ‘nice to have’ – the brokers and us are one team and we work together to make sure the proposition is right, not only for us but for brokers within the industry. And we’ll continue to do that.”

For instance, one particular issue raised by many of Citi’s broker partners was the fact that loan writers weren’t able to directly contact credit officers.

“Brokers said, ‘why can’t we talk to your credit officers?’ And indeed, why couldn’t they? So now we have a direct access to credit model… where when we look at a deal and we look at the serviceability on a deal, the broker is contacted by the credit officer to discuss the deal and is then provided with the credit officer’s direct line and email address, so that they can converse with that credit officer throughout the profile and the longevity of the deal.”

The implementation of this strategy has had positive flow-on effects in another area as well, said Milburn, with service times reducing significantly thanks to a more ‘streamlined’ process.

“On the back of the changes we’ve made with credit having the ability to speak to the credit officer, it dramatically cuts down the time of servicing your deal. If you’re not having to email and fax and wait for that information to come through and have… everyone clear on the requirements for the deal to proceed, it dramatically cuts down the turnaround time. This bank has been at a 48-hour turnaround time – or

brokernews.com.au

NEWS 21

already placed on the book, now maybe more so than a couple of years ago when the opportunities to cross-sell are far greater?

Looking ahead to 2014, Milburn says Citi plans to focus on helping brokers develop their businesses through technology and ensuring that the online application process is simple and efficient, as well as continuing to expand its Australian interests.

“What’s exciting for Citi going into 2014 is really the global view of the Australian mortgage market.

Australia is seen as a really great market for Citi to invest in and that is exactly the message we’re getting… whether it be from New York or Singapore, we know that we are in a very professional environment dealing with brokers in Australia. Citi recognises that and that is exactly the reason our

WE KNOW THAT WE ARE IN A VERY PROFESSIONAL ENVIRONMENT DEALING WITH BROKERS IN AUSTRALIA. CITI RECOGNISES THAT AND THAT IS EXACTLY THE REASON OUR GROWTH PLANS IN 2014 AND ONWARDS ARE PRIMARILY FOCUSED DOWN INTO THE AUSTRALIAN MARKET – ESPECIALLY FOR MORTGAGES better – for the last five and a half months and there is zero reason why it can’t continue to do so.”

And this, in turn, means BDMs can spend more time on the road.

“In 2013, our BDM team has been able to be out on the road a lot more. When you’re not sitting behind a desk dealing with some of the issues that poor turnaround times normally generate, you have the ability to be out on the road.”

Milburn also believes there’s far more competition within the home loan industry than there used to be and that, “rightly so”, more consumers are looking to brokers to source their mortgage.

However, he also believes many brokers struggle to stay relevant, to connect with their clients and to capitalise on their back-book.

“I’m not sure if it’s an issue rather than an opportunity, [but] how do you capitalise on the value of your back-book? How do you really deepdive that customer base to increase the cross-sell, therefore the ‘stickability’ of the clients you’ve

growth plans in 2014 and onwards are primarily focused down into the Australian market – especially for mortgages.”

However, Milburn knows such expansion won’t be possible without the help of Citi’s broker partners, which is why he will continue to encourage loan writers to speak up about issues that bother them – or let the lender know when something has gone particularly well.

“Listen, quite honestly, I know that sounds very simple, but unless we listen we’re not going to get it right. We do not have the answers to what next year, the year after and the year after that looks like from an industry perspective. We need to make sure we get the feedback of our brokers, make sure we listen to the clients that we’re bringing on through brokers and react to that. We cannot be followers either; we absolutely need to be the leaders and the leaders not only in customer service, but in the innovation we spoke of and building brokers’ brand and trust within our own business.”

BEST PRACTICE 22

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Is ASIC watching your Facebook?

Brokers are told they need to use social media, but dangers exist in using it improperly

S

ocial media is categorised by brief, informal and often relatively impulsive messages. But brokers need to be wary of what they put online – or face the consequences, say legal experts.

Regulatory bodies in the UK and US have recently made statements making plain their intentions to treat all social media content posted by professionals in the financial services industry in the same way as financial advice provided through any other channel.

Giles Williams, partner at the regulator centre of excellence at KPMG, says it’s important for business owners to find a balance between supporting innovation and upholding their compliance responsibilities.

“Focus on ensuring that all of the inputs, regardless of channel, are being captured from the sales and marketing phase through to any post-sales interactions so that the sales process can be reconstructed,” he says.

In Australia, ASIC’s stance is to treat all social media communication from business accounts under advertising laws, says Jon Denovan, partner at Gadens Lawyers.

“Advertising in the financial services space and the credit space is very regulated. ASIC has issued some pretty extensive guidelines along that in terms of mentioning comparison rates when you’re talking about rates and not being misleading or deceptive,” says Denovan.

The expectation of short and to-the-point information on social media, as well as space restrictions on platforms such as Twitter, can open brokers up to the danger of non-compliance, he says.

Providing links to media where more detailed and compliant information is available can help to circumvent some of these issues.

ASIC’s regulations, however, warn that “the physical limitations of a particular medium are not a reason for producing an advertisement that might mislead”.

Complex products are a minefield when it comes to social media, the regulator warns, as it becomes

a challenge to present fully compliant information within space restrictions.

“Providing a facility for a consumer to access additional information (eg by clicking through to another web page) can be an effective way of providing further details and helping to engage the consumer. However, providing a facility for a consumer to access additional information cannot be used to correct a misleading overall impression in the advertisement.”

If this additional information is provided via a third-party site, rather than your own website, this is particularly dangerous territory, as ASIC considers it less likely that consumers will make the effort to follow that information up.

Denovan suggests brokers act with extreme caution, and follow the guideline of “if you can’t comply don’t reply” when it comes to social media.

When offering financial advice via online platforms, ensure that it is made clear the advice is of a general nature.

It’s important to ensure that anyone with access to business social media platforms is familiar with ASIC’s regulations, says Denovan, or risk getting on the wrong side of the regulator.

“ASIC love looking at the internet. It’s so common now that businesses are in trouble for what they’ve said on their website, so going beyond the websites and into blogs and other social media is something that could easily happen, and I would expect that ASIC will be monitoring it and may take exception.”

THE GUIDELINES: WHAT ASIC SAYS Clearly distinguish advertorial content from all other commentary.

Social media and blogs constitute ‘high-trust environments’. Consumers are less likely to expect advertisements and therefore may be more susceptible to considering the advice or information as objective.

FAST FACT

24% of Australians say they use their lunch break at work to catch up on social media Source: ING Direct

Ensure there is enough space to comply.

The compliance of social media content will be judged on what impression a consumer is likely to glean from an initial viewing. Promoters should carefully consider the appropriateness of some new media channels if content limitations mean that there is insufficient space to provide balanced information.

Keep a record. Promoters and consumers should be able to keep a record of an advertisement, including any disclaimers or warnings. This will provide support should any future dispute arise about the advertisement.

Link to additional resources. Provide links to further information when possible, but this does not remove the responsibility for ensuring that the initial content avoids misleading the consumer.

THE COALFACE 23

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Banking, babies and broking: A bit of advice from this year’s AMA ‘Young Gun, Independent’, Marissa Schulze Rise High Financial Solutions’ Marissa Schulze moved from banking to broking after having her first child and says she recommends the move to other new parents

S

outh Australian broker and this year’s AMA ‘Young Gun, Independent’ award winner Marissa Schulze moved from banking to broking when her first child was born – and says it’s a great career option for parents looking for a balance between financial freedom and quality time with their children.

“After graduating from university, I pursued a career in banking. I started in Bank SA in their commercial banking team and moved to Westpac to take on a senior relationship management role in their commercial team. After having my daughter, I decided that I needed flexible working hours so that I could spend as much quality time with her as possible. When I was introduced to mortgage broking it was the perfect option for me as it allowed me to pursue a career helping people to achieve their goals, whilst keeping me intellectually stimulated and giving me the flexibility I wanted to enjoy quality time with my family.”

Schultz says the ethos underpinning her business, Rise High Financial Solutions, is to empower clients to achieve their financial goals.

“We place a huge level of importance on always keeping our promises and commitments and doing what we say we will do, and our clients tell us that this is reason we stand out and the reason they feel comfortable referring their family and friends. We spend the time to listen to our clients and truly understand their short-term and long-term goals, and develop strong personal relationships

MARISSA SCHULZE

with our clients. Following settlement, we continue to proactively help our clients to achieve their goals through ongoing reviews, ongoing education and regular communication.”

Her advice to other brokers just starting out in the industry is to remember that you’re ‘‘only rewarded if you work hard”.

“So be prepared to take control of your future and make it happen through hard work.

Make sure you love what you do because your clients will appreciate your passion and commitment to helping them to achieve their goals. It is great if you can work with a mentor who is already successful in the industry who can help guide you through your journey.”

FINANCIAL SERVICES 24

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Adviser handed lifetime ban Disgraced financial adviser Glenn Russell Evans has been handed a lifetime ASIC ban from providing financial services after being jailed for fraudulent conduct that cost investors more than $1.6m.

In May 2013, Evans was sentenced to five years’ jail with a non-parole period of three years and nine months. An investigation

by ASIC found that the conduct happened while Evans was a director of Kismet Trading, which is now deregistered.

Between September 2002 and October 2008, Evans entered into contracts with individuals and SMSFs to invest in listed Australian

ZURICH CLEARED

equities and derivatives. Evans was found to have: • failed to invest the money as agreed • provided false trading and performance reports • failed to repay the balance of the proceeds to the investors • used clients’ money as collateral for his personal trading account without their authorisation When sentencing Evans in May, Justice David Arnott SC said the man was “motivated by a combination of personal greed and ambition”.

Evans has the right to appeal to the Administrative Appeals Tribunal.

in exec’s suicide

Z

urich Insurance Group has been cleared of subjecting the late CFO Pierre Wauthier to any undue or inappropriate stress, according to two independent investigations conducted by the Swiss Financial Market Supervisory Authority (FINMA).

Wauthier committed suicide at his Switzerland home in August. Days later, group chairman Josef Ackermann quit the company, stating that the family of the firm’s late finance chief felt he should shoulder some of the responsibility for the executive’s apparent suicide. The investigations concluded that Ackermann and the company were not to blame for Wauthier’s death.

Following the suicide, FINMA began two investigations, the first to determine whether Pierre Wauthier had been subjected to any “undue pressure”, and the second to review whether Zurich’s financial figures had been appropriately presented.

The reviews had to determine whether any inappropriate pressure had been exerted on the CFO by the chairman of the board or any other decision-maker, the manner, extent and timing of which could have supported the conclusion that Zurich was improperly managed.

They also had to determine whether there was any other indication that Zurich was improperly managed; and whether there were any irregularities with regard to financial reporting.

The investigation into “undue pressure” involved evaluating numerous documents and correspondence, and questioning individuals who worked with Wauthier. Zurich said the investigation found no indication of any such pressure or other inappropriate conduct, or of any improper management of the company.

FINMA is said to have also directed the group’s auditors to conduct additional procedures regarding Zurich’s financial statements, and this investigation found no irregularities with regard to financial reporting, which complied with regulatory and accounting requirements.

FAST FACT

TOO MUCH FOCUS ON THE DETAIL: APRA

56% Proportion of Australians who have reviewed at least one financial product online over the last 12 months Source: TAL

Over the past decade, the Australian Prudential Regulatory Authority (APRA) has focused too much on detailed securitisation rules, says Charles Littrell, APRA’s executive general manager of policy, research and statistics.

He told the Australian Securitisation Forum that reforms were being carried out to address this, as Australia had “largely dodged this bullet” during the GFC but lessons learned must be captured in APRA’s prudential framework.

The GFC shook up the financial world and made change crucial.

“There was the surprise that all the complexity in the market, touted in various forums as innovation and completing markets, turned out to be, by and large, simply a way to

conceal bad credit risks from end-investors,” Littrell said.

“From, say, 2007 to 2011, there was a fundamental global reassessment about the value attaching to securitisation, and much of that reassessment was distinctly negative.

“There was an appalling range of lessons about the dangers that attach to securitisation in practice, when the tool is used to facilitate poor-quality lending, fragile funding, and opaque securities origination.”

So, like other regulators around the world, APRA intends to reform its regulatory and supervisory approach to supervision. It will take an approach “firmly grounded” in the economics of the relevant risks, and discourage those practices associated with unacceptable risks, said Littrell.

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ONE YEAR ON 26

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, Dec 2012

Brokers at top of ASIC’s 2013 hit list

Late last year, the industry regulator said it would be stepping up its monitoring and supervision of the credit industry. An ASIC representative told Australian Broker that brokers, aggregators and lenders could expect the watchdog to be keeping a keen eye on the industry in the year ahead.

What’s happened since?

True to its word, ASIC has had a busy 2013. With at least 11 brokers banned and at least three fronting the court on charges, the regulator has been stringent in its regulation of the industry. In spite of this, it’s copped criticism for failing to investigate bribery allegations related to Leighton Holdings and the RBA’s involvement in the Securency scandal.

CBA announces massive Aussie investment

Commonwealth Bank, which has long held an interest in Aussie Home Loans, last year decided to up its stake from 33% to 80%, with an eventual right to move to 100% ownership. John Symond was slated to remain as executive chairman, and the company would continue to operate as a standalone mortgage broker.

What’s happened since?

While some brokers decried the move, saying it represented more big-bank control over the broker channel, CBA’s upped stake has left Aussie largely unchanged. Commonwealth Bank CEO Ian Narev recently told the Aussie Home Loans National Sales Conference that the bank had no plans to change the way the franchise operation did business.

brokernews.com.au

Fine-tuning the SMSF space

W

ith SMSF property investment becoming a major focus in many brokers’ service offerings, Australian Broker caught up with Westpac’s SMSF trustee division head, Sinclair Taylor, general manager of third party mortgage broker distribution Tony MacRae, and Outsource Financial’s Tanya Sale at a recent forum, to discuss some of the finer details.

When it comes to lining up SMSF clients, Taylor noted that, while many brokers tend to focus on financial planners, accountants are equally – if not more – important.

“Accountants are the main originators of SMSF and are really seen as trusted advisers by most consumers in this space … Only about a third of trustees in this space have an ongoing advice relationship with a planner, yet I would suggest almost 100% of trustees have an ongoing relationship with their accountant.”

However, MacRae stressed that the SMSF environment isn’t for everyone and brokers need to be mindful of what they can realistically accomplish by diversifying into the area.

“You’ve got a duty of care to your client … In general, I think in the broker community there’s growing awareness that perhaps it’s not for everyone. [But many] brokers will ultimately decide that they want to play in this space, and if they do, there’re ample resources available for education and training.”

In terms of advice that brokers are legally allowed to offer, Taylor explained that there are a number of different entry points to an SMSF transaction, making the question a little difficult to answer.

“I think the challenge that the broker community faces is there are so many different entry points to the transaction.

There are very self-directed trustees that get no advice from anyone … there are people who do the full advice process, etc.

So the challenge is knowing where you pick it up. “[ASIC have] found that the quality of advice in this space is poor, and all of us need to contribute to raising the bar.”

Sale went one step further, saying SMSFs should only be available through accredited individuals.

“We have to be really careful in this space … because ASIC are watching it closely – and not only ASIC: the ATO are all over this like a rash. It shouldn’t be on offer to every man and their dog in the broking world; it is a specialised arena and there should be specialists that are only accredited to sell that.”

FORUM 27

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Fraud broker let off too easy?

Some industry professionals were miffed at a light sentence handed to a banned broker

Taking responsibility

ASIC recently set out concerns it had regarding real estate agents offering advice to clients on SMSF property investment, despite not holding an AFS licence. L3nder brought up an issue that a number of readers have touched upon in the past.

“This is getting ridiculous. When is the borrower going to take some responsibility for their actions? It sounds like we Australians are so docile we need the government to protect us from any decisions we make because we might believe a real estate agent really could give us sound tax advice. Maybe we make illegal any discussions about finance or investment altogether by anyone not licensed

by ASIC, so Uncle Joe does not make a ‘misleading statement’ to his nephew at the family BBQ, or a mate does not discuss it at the next poker game.”

L3nder on 7/11/2013 2:44PM

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South Australian broker was recently convicted in the Adelaide Magistrates Court after pleading guilty to five charges of giving false or misleading information to Westpac. He received a four-month suspended sentence and was released on a recognizance that he be of good behaviour for 12 months, and was also dealt a four-year ASIC ban. Some brokers felt he got off too easy.

Keith of the West accused ASIC of “blowing their trumpet” on the case, with little in the way of punitive results.

“Hardly going to send fear to others caught in the future!

Suppose he can go back to selling real estate, mobile phones or used cars!”

Phil said the sentence would do little to deter other fraudsters.

“It was a crime committed by a broker on multiple occasions, now he gets a suspended sentence, and only four months

at that. Then as a deterrence, he pretty much gets off with a slap on the wrist and a criminal record. Pretty soft, really. White collar crime doesn’t get what it deserves. Only good is that he is another out of the industry until the next one rolls up and takes a swing.”

NoTimeLikeTheFuture praised ASIC’s response and pointed out that the sentence was up to the magistrate.

“Well done ASIC in securing the conviction. I know there are many obstacles. I wonder if brokers make good magistrates?

It takes more than a diploma.”

And Gary said that there were unscrupulous operators in every profession.

“Just goes to prove no matter what qualifications any professional organisation sets there is always approximately 5% who bend or break the law.

Judges, solicitors, accountants and even mortgage brokers: the gaols have their fair share of each.”

MELBOURNE BROKER HANDED FIVE-YEAR BAN

L3nder on 7/11/2013 2:35PM “So did the lenders, did they get a 5 year ban also?”

ASIC recently handed a five-year ban to a Melbourne broker for supplying false information to lenders.

MORE POWER!

In its submission to a Senate inquiry on its performance, ASIC asked that its scope of power be expanded to include the ability to issue search warrants.

Country Broker on 5/11/2013 10:04AM “This is an attempt at kingdom building.

They need to be like the rest of the

What do you think?

Leave your comments at brokernews. com.au

IS ASIC WATCHING YOUR FACEBOOK?

Legal experts have warned that business owners need to keep compliance in mind when interacting with social media.

AL PUPELLO on 7/11/2013 2:27PM “We need to applaud ASIC for the tough stance they continue to adopt against the ‘cowboys’ in our industry.”

financial services industry and be more efficient.”

Hmmm.... on 5/11/2013 3:32PM “More power devoted to a watchdog means the watchdog is then under pressure to find something – even where it may not exist in order to justify their new powers, usually at the expense of common sense. More rule changes than an AFL game.”

NoTimeLikeTheFuture on 12/11/2013 9:12AM “Finally people are seeing that Facebook has consequences, not only for business but also character assessment. Gen Ys who grow up to become business or political leaders will have an interesting time.”

PEOPLE 28

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Horror and hope in the aftermath of Typhoon Haiyan Key Media graphic designer Marla Morelos and several of her colleagues visited Bantayan Island in the central Philippines to offer food and hygiene packages to typhoon victims

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yphoon Haiyan slammed into the central Philippines early last month leaving an estimated 7,000 lives lost and entire towns collapsed into rubble. Many of those working in Australian Broker publisher Key Media’s Manila office have close ties to typhoon victims, including Marla Morelos, a member of our graphic design team whose mother’s hometown on Bantayan island was completely destroyed by the storm.

Morelos and several other Key Media staff collected money and supplies, which they handdelivered to victims in the Binaobao district of Bantayan Island. This is Marla’s story: “Our group left Manila for Bantayan early on the morning of November 16. To get there is a 2.5-hour trip to Hagnaya port and an hour’s trip by ferry.

Bantayan Island has three large municipalities, 25 barangays [villages] and a population of about 137,000 people.

Getting on the ferry felt like an exercise in patience. We couldn’t get any useful information from any of the officials at the port area as to how and when vehicles were allowed to board. There was a kilometre-long line of cars and trucks, some vehicles had been waiting for eight hours to get on.

Officials at the port were trying as hard as they could to get people and relief supplies out as fast as possible. All of us felt the sense of urgency to get to the island as fast as we could.

The Bantayan port area was full of people. Most of them waiting for relief goods to be handed out, others were aid workers trying to get back to Cebu

for more supplies. One relief worker told us that there were still so many areas in and around Bantayan that hadn’t received any aid. This was a week after Haiyan hit.

Bantayan looked like the aftermath of a massive war. I have never seen anything as heart-breaking as the destruction Haiyan caused to my mother’s hometown. Entire acres of trees were wiped out.

There was no electricity or water. Families made makeshift tents out of broken pieces of wood or tarp and galvanized metal, whatever they could find. Those who had no shelter slept outside, on the ground, next to whatever possessions they managed to save. Bantayan was where my mother was born and our family was heartbroken when we learned that all that was left of our house was the framework of the roof and four pillars.

Our group went to a small barangay called Sungko to hand out relief goods donated by Key Media. They greeted us with big smiles on their faces and thanked us profusely. A lot of women and children would run up to our vehicle and knock on the windows and ask for more relief goods. That day, they were in good spirits and they were all thankful and happy to know that they weren’t forgotten.

One thing I saw that I will never forget was the kindness of strangers; the strength of the human heart and its capacity for compassion. I saw cars parked by the side of a country road and private citizens going out and giving bags of food to anyone they saw in need of help. The international community that was working on the ground, medical teams, search and rescue, journalists; all of them were such a wonderful sight to see. Be they private citizens or part of a bigger organisation, the spirit of community and compassion that brought people to our small part of the world is something I’ll remember for the rest of my life.

Recovering from the typhoon will be long and difficult and may take several years. But, Filipinos are resilient and patient. We’ll be back on our feet.

No matter how extensively preparations are made, Mother Nature decides the course it takes and we have to take better care of our natural resources, environment and heed warnings for climate changes.”

For those who want to help, Morelos says contributing donations to the following organisations will ensure the money reaches those who need it most: The Philippine Red Cross, the World Food Programme, Habitat for Humanity and the UN Refugee Agency.

brokernews.com.au

IN FOCUS

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onnective members and lender partners made their way to the Sunshine Coast in November for Connective’s ‘Search for the Grail’ Conference.

Marking 10 years in operation for Connective, the record breaking attendance enjoyed keynote addresses from the likes of Jessica Watson and gold medallist Geoff Heugill.

CAUGHT ON CAMERA 29

INSIDER 30

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THE WORST OFFICE CHRISTMAS PARTIES EVER Ah, the office Christmas party. That wonderful time of year when coworkers come together to celebrate hard work and camaraderie...only, it’s also often around the same time you realise you don’t really know any of your colleagues very well and that, combined with an open bar and a karaoke machine, can make for one awkward night.

So, to make you feel a little better about any past (or future) shockers, we’ve compiled the best collection of head-shaking office party stories the internet has to offer. Hold on to your eggnog, guys…

Rural man markets house as drug-dealer haven

“I work at a non-profit agency for the blind, and a large percentage of our staff is blind. At the last holiday party at my office the upper management hired a DJ and told him to come up with some ice breaker games. The only ice-breaker this DJ could come up with was a game where the players had to keep toilet paper rolls in between their legs, and another player had to use a toilet plunger to try to spear the rolls from between the other persons legs.

What this amounted to was that we had a bunch of blind people thrusting a wooden plunger at each other’s crotches. It did not end well.”

A

rural South Australian man has taken some heat after advertising his house as a drug-dealer haven.

After listing the dilapidated Parrekai property for six months without receiving a single enquiry, owner Michael Uspensky decided to opt for some more unconventional marketing.

“Amateur chemist or horticulturalist?” reads the advertisement. “Waiting til the heat’s off?

Prefer to be left alone? A steal at only $55,000 and 27kms from the nearest cop shop.

“Seriously, a bargain buy for someone who wants to really get away from it all.”

Inspired by the TV show Breaking Bad – about a high school chemistry teacher who starts making crystal meth to supplement his income – Uspensky said the advertisement was designed to be tongue-in-cheek.

“Politically incorrect is always good because if people have a laugh then they’ll listen,” Uspensky told news Ltd. But evidently not everyone in the area shares Uspensky’s sense of humour.

“The locals weren’t very impressed ... I’ve only had a few calls that were negative, but I’ve had quite a few calls saying it’s hilarious.”

One real estate site removed the advertisement saying it “contained inappropriate content that could have been misconstrued”.

“The advertisement breached the terms and conditions of the website and as a result was taken down with the full agreement of the agent and it is no longer on the site,” said a spokesperson for realestate.com.au.

Uspensky said he was realistic about his expectations of a sale.

“It’s a crap house, it’s solid, but it’s $60,000.

People looking to buy a $60,000 home aren’t going to be expecting the Taj Mahal,” he said.

“Only five people of 30 showed up (including myself). We proceeded to drink too much and subsequently discussed in great detail which of our coworkers we would cage fight in the office.”

“One year a girl, who had been divorced for about two or three years, effectively came out of the closet at the company Christmas party by inviting her girlfriend. We were all surprised, understandably, but it wasn’t a big deal until the girlfriend got drunk and started picking fights with the employees. Our co-worker had to drag her girlfriend out of the party as she continued to raise hell. That was a fun night.”

“The entertainment consisted of the head of the company showing us his vacation slides… and then he sang a song about a bear. The slides were beautiful, but just reinforced the difference between the haves and have-nots.

And it got old after the second carousel.”

“The party was like a frat house run amok. The director drank too much and threw up shrimp cocktail on the white shag carpet. The plant manager got into a screaming fight with his wife in the driveway.

The chemist was found making out with the loading dock supervisor, who was about 30 years her senior and, more importantly, not her husband. And I accidentally walked in on the sales director peeing in the unlocked hallway bathroom (which I thought was the coat closet; we were both surprised). The president himself got completely hammered and went around telling people totally inappropriate stories, gave me a giant bear hug that lasted a little too long, and broke the sliding door to his patio.”

DIRECTORY 31

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FINANCE Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 21

LENDER

Citibank Mortgages 1300 652 059 www.mortgagebroker.citibank.com.au Page 16 & 17 Homeloans Ltd 13 38 39 www.homeloans.com.au Page 11 Liberty Financial 13 11 33 www.liberty.com.au Page 3

Macquarie 13 62 27 macquarie.com.au/mortgages Page 32

National Australia Bank www.nabbroker.com.au Page 5 Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 31

SHORT TERM LENDER

Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2

Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 7 & 15

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 6 RP Data 1300 734 318 Page 23 Trailerhomes 0417 392 132 Page 26

To advertise in Australian Broker, call Simon Kerslake on 02 8437 4786